By Holger Hansen and Madeline Chambers
DORTMUND/BERLIN, Germany (Reuters) - Germany's Social Democrats (SPD) rallied behind their leader on Sunday, agreeing policies on investment, social justice and Europe that they hope will reverse a slump in opinion polls and end Angela Merkel's 12-year hold on power in a September vote.
At a 'feel-good' party conference, leader Martin Schulz accused Merkel of silencing debate on issues like pensions and failing to stand up to the United States.
The SPD surged in the polls after naming Schulz as leader in late January, overtaking Merkel's conservatives in some, but those gains have now evaporated and the party is struggling to regain momentum.
An Emnid poll on Sunday showed Merkel's conservatives widening their lead to 15 points.
In an 80-minute speech before the party agreed its policy manifesto, Schulz, a former president of the European Parliament, was most passionate on Europe.
"Merkel and (Finance Minister Wolfgang) Schaeuble were very firm when it came to policies like austerity in Europe but you hear little to nothing from them about the rule of law and democracy in the EU," he said, taking aim at Hungary and Poland.
He said the SPD aimed to strengthen Europe by stressing the values of human dignity and by investing in innovation.
The chances of denying Merkel a fourth term look slim for the SPD, who are currently junior partners in her right-left coalition, but some have been inspired by the resurgence by Britain's Labour party under Jeremy Corbyn in a June 8 vote.
"What we can learn from the British is that we won't let ourselves be depressed by polls. We will fight for our own convictions," SPD General-Secretary Hubertus Heil told Reuters.
Like Corbyn, Schulz has succeeded to some extent in appealing to younger voters. Some 40 percent of members who have joined since Schulz's nomination are under 35, says Jusos, the youth branch of the SPD.
Despite a roller-coaster few months, delegates of all ages said they felt energized by Schulz.
"Martin Schulz spoke in a very committed way, very inspiring," delegate Frank Boermann from Berlin told Reuters. "He's managed to lift the party again."
But the reality of having lost power in two state elections and failing to win in a third this year has knocked morale despite the cheers and red flags emblazoned with "Time for Martin Schulz" slogans evident in Dortmund on Sunday.
With a sharp fall in the number of refugees arriving in Germany, many voters have forgiven Merkel for her open-door migrant policy and see her as a safe pair of hands.
To have any chance of winning in September, the SPD needs to mobilize traditional supporters, who have either not voted or shifted allegiance in the past few years.
To that end, Schulz has focused much of his campaign on social justice. He wants to reduce taxes for low-and middle earners, keep pensions stable, extend free education and invest more in infrastructure.
He won a standing ovation for saying he would not sign a coalition deal unless it included a commitment to gay marriage.
He has, however, disappointed some on the left by refusing to commit to a wealth tax. To defuse an embarrassing showdown on Sunday, the party is appointing a commission to look into it.
The SPD even wheeled out ex-chancellor Gerhard Schroeder, the last Social Democrat to lead Germany, to boost morale. He said they could still win and reminded them of the SPD's fightback to run Merkel close in the 2005 election - the last one he fought.
(Additional reporting by Thorsten Severin; writing by Madeline Chambers; editing by Mark Heinrich and Adrian Croft)